LIFE IN CANADA

The procedure for purchasing real estate in Canada

Canada has a striking variety of both climatic and economic conditions. The country has densely populated metropolitan areas and rural areas, rich provinces, where the average cost of housing exceeds half a million dollars, and inexpensive locations. So the potential buyer in Canada must first of all decide on the location of the object. Different provinces have different legislation, different types of housing and, of course, varying prices. However, by and large the property purchase procedure is common. All the nuances of the deal – in our article.

Rights and obligations of foreign buyers

Foreigners can purchase real estate in Canada. If you plan to buy a home for yourself, you can do so freely, but when buying for investment purposes, you should carefully study the legislation of a particular province, as some of them have restrictions for non-residents (those who do not have citizenship or permanent residency).

For example, some provinces prohibit them from buying agricultural or recreational land or limit the maximum area that can be purchased. For example:

  • Alberta limits non-residents to two plots of agricultural or recreational land, which must not exceed 20 acres (8 ha) in total.
  • Saskatchewan limits the sale of agricultural land to foreigners to 10 acres (4 ha).
  • Manitoba bans non-residents from owning more than 40 acres (16 ha) of agricultural land and requires them to move to the province within two years of buying the land.
  • Quebec generally does not allow non-residents to buy farmland without permission from the Quebec Agricultural Protection Commission. In this case, a non-resident is any person who has lived in the province for less than 366 days in the 24 months preceding the real estate transaction.

At the same time, many Canadian banks will not give a foreigner a mortgage for more than five properties. Also, some provinces impose restrictive taxes on non-resident buyers.

For example, in the province of Ontario, a foreign homebuyer in the Greater Toronto Area will have to pay a separate “speculation tax” (NRST) of 15% on the transaction amount. However, if he later becomes a resident of Canada, he will be able to claim a refund of the tax paid. Similar measures exist in British Columbia: there non-residents pay 20% of the transaction amount as a special tax. This rule applies to transactions in Greater Vancouver, the metropolitan area and several other parts of the province. Other provinces, such as Quebec, are thinking about introducing similar taxes, but they have not yet adopted laws.

Rights of foreign property owners

Buying real estate does not give the right to a residence permit or permanent residence, the existence of housing in itself will not become the basis for obtaining a visa. Nevertheless, for applicants for permanent residence on the basis of a business, the availability of housing in Canada, especially in the same province where the company will be located, can be considered an advantage.

More about moving to Canada

Duties

A foreign owner of a property in Canada is obliged to pay property tax, income tax – if he rents out a home, and a number of other fees.

Note! Tax residents of the Russian Federation must notify the Russian tax service of the opening of accounts with foreign banks and of the movement of significant funds through them.

Searching for real estate in the country

Before you begin your search, you need to determine where your future property will be located. Natural and economic conditions in Canada are very diverse, so it is worth considering the climate, job prospects, explore the surrounding schools – if you move with children.

The next question is how you see your ideal home. Again, this largely depends on the area. There are many options: an apartment in the city, a townhouse, a detached house… Make a detailed checklist of what should be there and what you do not want to see.

The third fundamental question – how much are you willing to pay for it, so even before you start looking for a mortgage, which you can count on, and to build a further strategy is based on the available amount.

Mortgage in Canada

Foreigners in Canada can get a mortgage, but the process is not very simple, because for the bank one of the most important indicators is a credit history, and the newcomer to the country does not have it. So in addition to documents showing your income and the origin of funds for the first payment, you may also need a letter from the bank whose services you used in your home country. For clients of international banks, which have branches in Canada, everything usually goes much easier.

In general, practice shows that banks are guided by the following rule when approving a mortgage amount. Your monthly housing costs, including mortgage payments, utilities, etc., may not exceed 30% of your gross monthly income and your total monthly debt load (mortgage payments plus other loan payments) may not exceed 40% of your gross monthly income.

Residents may give as a down payment of only 5% of the amount (for real estate worth up to 500 thousand CAD, or $ 400 thousand), and 95% to obtain credit. If the share of their money is less than 20%, they would need to insure the loan through the CMHC (Canadian Mortgage and Housing Corporation) or a private insurer.

For non-residents the picture is different: at least 35% have to be paid with their own money, and only 65% can be borrowed. To do this, you will need to open an account at a Canadian bank. Mortgage interest for non-residents is formally the same as for residents, but if you have no credit history, the bank may well insure and inflate the rate.

To take out a mortgage, you will need to use the services of a Canadian mortgage broker: direct to the foreigner a home loan is unlikely to be given. Broker will examine your situation, prepare an application and submit it to several banks. His task is to get you the best conditions.

To open an account and obtain a mortgage in a Canadian bank, you will need the following documents.

  • Photo ID (foreign and domestic passport, instead of which you can use a driver’s license or other documents).
  • Proof of your employment and income (pay stubs, tax returns, bank statements, etc.).
  • Proof of the down payment and its source (for example, savings account, sale of other property, receipt of a gift or inheritance). If a relative contributes to your initial payment, you will also need a letter signed by them confirming the purpose of the gift and that it is a gift, not a loan.
  • Reference letter from a bank in your country.
  • Bank statements for three months.
  • Credit check in Canada.
  • Information about any of your other assets.
  • Information about your debts (such as credit card balances, car loans, lines of credit, student loans) or financial obligations (alimony, etc.).

Do not forget to translate all foreign-language documents and have them certified by a notary.

If the bank has approved your mortgage, put it in a preliminary agreement. It specifies the maximum loan amount that you can count on, the upcoming payments, and fix the interest rate – for a period of 60 to 120 days. This means that even if the bank’s mortgage rate rises during the conclusion of the main contract, your loan will be on the same terms as you agreed. And if the rate falls, you will of course contract at the new, more favorable rate. This document does not obligate you to take out a loan with this particular bank, so you are not risking anything.

For some real estate agents, pre-approval is one of the key documents they are not willing to work without.

Once you have decided on the features of the home and the amount available, you can proceed directly to the selection.

Search for accommodation

The easiest way to start your searches is from specialized sites.

Major Canadian Real Estate Sites:

It is also a good idea to contact real estate agents directly; they may have offers that are not publicly available or important additional information. A professional agent must be licensed by the Canadian Real Estate Association or a similar provincial or city-wide organization.

You can also apply for a real estate search on Prian.ru, and realtors will send you the best match for your needs.

First, you should see some offers so you can evaluate prices and get an idea of what a typical Canadian house looks like in the area you are interested in. It is also a good idea to read articles about real estate and immigration to Canada to get a better idea of the Canadian real estate market and life there.

Realtors and lawyers in Canada

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